After 80% Return In 2013, Senvest Starts 2014 With Gains

After 80% Return In 2013, Senvest Starts 2014 With Gains
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After posting +79.4 percent returns in 2013 and 34.9 percent in 2012, the Senvest Partners returns train slowed in January, generating a -0.2% return at a time when the S&P 500 (INDEXSP:.INX) fell -3.5%, according to an investor letter reviewed by ValueWalk.

Senvest Partners: impressive loss in January given long exposure

The -0.2% January return was even more impressive given Senvest Partners’ 130 percent long exposure.  “The Fund benefitted from a number of positions that had significant moves higher which offset the overall market weakness,” the investor letter said. Flavor technology company Senomyx Inc. (NASDAQ:SNMX), one of Senvest’s holdings, lead the month’s positive contributors when it surged more than 50%, for instance.

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The letter also noted that drug company Depomed Inc (NASDAQ:DEPO) gained 13%, as investors followed through on the positive reception of the company’s December acquisition of a pain therapy drug. Online foreign currency broker Gain Capital Holdings Inc (NYSE:GCAP) rallied 18% after reporting solid December retail and institutional trading metrics. Haptics technology company Immersion Corporation (NASDAQ:IMMR) jumped 13%, and digital signal processing licensor Ceva moved up about 14%. Core real estate holdings contributed to January’s results, including commercial mortgage REIT Northstar Realty Finance Corp. (NYSE:NRF) up 8% and mixed use real estate operator/developer Howard Hughes Corp (NYSE:HHC), which gained 4%.

Buying on a drawdown

Also contributing to January’s results was an opportunistic short term investments.  Buying on a drawdown, Senvest picked up less-than-truckload trucking operator YRC Worldwide, Inc. (NASDAQ:YRCW). “This highly leveraged company was in the midst of a financial restructuring that depended upon a new labor agreement. The stock tanked on news that the union had voted down a proposed labor deal by YRC’s management and we picked up shares quickly, acquiring 7% of the company,” the letter noted. This experience was helpful because it gave Senvest traders “situational knowledge late last year with a profitable investment in competitor Arkansas Best Corporation (NASDAQ:ABFS), which also went through a labor renegotiation and we learned from that experience that the first vote is not the only/last vote. We believed that it made business sense for YRC’s lenders to cooperate with a refinancing since a liquidation of assets wouldn’t maximize recovery values and that they would be better served working out a deal with the CEO to allow management a chance to wring more cash flow out of the business over the next few years.”

Losses: Senvest caught in global market turmoil

Monthly losses came in part from shipping fuel supplier Aegean Marine Petroleum Network Inc. (NYSE:ANW), which is exposed to global trade and the emerging markets turmoil, dropped about -19% when poorly received macro economic data from China weighed on the stock.  Caught in the emerging markets currency devaluation, the fund lost on Argentine oil and gas exploration and development company YPF Sociedad Anonima (“YPF”).  The stock fell by a third after Argentina officially devalued the peso by about -20%. “Despite what is a negative development to the company’s financials, we believe that upside exists as a critical component to a solution for the country’s economic crisis will come from the development of its oil and gas resources. Weight loss management company Nutrisystem (“NRF”) lost -14% on no news.”

Senvest Partners notably scaled out of a few core holdings that were close to their target prices or which reached too large a position size. The fund also “initiated a short position in a theme park operator and added to a short position in a home builder,” the letter said, while it added modestly to investments in mortgage insurer and long-term care/life insurer Genworth Financial Inc (NYSE:GNW); NutriSystem Inc. (NASDAQ:NTRI); Immersion Corporation (NASDAQ:IMMR); CEVA, Inc. (NASDAQ:CEVA); and Apple Inc. (NASDAQ:AAPL). 

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Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)

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